The U.S. Government seizes and shut down Costa Rica based Virtual Currency Liberty Reserve as part of a larger effort by the U.S. government to put pressure on virtual currencies to maintain their control on the international money transaction mechanisms. This is a step in combating money laundering, however it seems that the classical money laundering schema of anonymous shell companies in Dalaware and C.o are not in the focus of the war.

U.S. federal law enforcement agencies on Tuesday announced the closure and seizure of Liberty Reserve, an online, virtual currency that the U.S. government alleges acted as a financial hub of the cyber-crime world and a new trend for the money laundering industry. It processed several billion USD in criminal proceeds over the past seven years showing an alternative to the classical money laundering techniques based of shell companies and deception of swifts bank transfers. With the use of virtual money the bank regulation can be evaded and the criminals can launder illegal money. The registered users can perpetrate different transactions evading the SWIFT control for the money “issued” by the company. Some companies accept this virtual money for means of payment too, i.e. changes into official currency, thus it becomes available everywhere in the world and can be transferred to everywhere.

The news comes four days after libertyreserve.com inexplicably went offline and newspapers in Costa Rica began reporting the arrest in Spain of the company’s founder Arthur Budovsky, 39-year-old Ukrainian native who moved to Costa Rica to start the business.

Despite the US government’s claims, certainly not everyone using Liberty Reserve was involved in shady or criminal activity. As noted by the BBC, many users — principally those outside the United States — simply viewed the currency as cheaper, more secure and private alternative to PayPal. The company charged a one percent fee for each transaction, plus a 75 cent “privacy fee” according to court documents.

“It had allowed users to open accounts and transfer money, only requiring them to provide a name, date of birth and an email address,” BBC wrote. “Cash could be put into the service using a credit card, bank wire, postal money order or other money transfer service. It was then “converted” into one of the firm’s own currencies – mirroring either the Euro or US dollar – at which point it could be transferred to another account holder who could then extract the funds.”

It seems clear, however, that the action against Liberty Reserve is part of a larger effort by the U.S. government to put pressure on virtual currencies.

Several of Liberty Reserve’s competitors have apparently seen the writing on the wall and moved to distance themselves from U.S. customers. On Saturday, digital currency Perfect Money posted a note to its site saying it would no longer accept new registrations from individuals or companies based in the United States. WebMoney, a digital currency founded in Moscow and probably the closest competitor to Liberty Reserve in terms of users and daily transfer volumes, started blocking new account signups from users in the United States at least two months ago.
It’s also not clear how the government’s actions will impact Bitcoin, a peer-to-peer digital currency that is gaining worldwide currency and momentum. While Bitcoin’s distributed nature in theory lacks the geographic central point of failure that allowed the US government to take action against Liberty Reserve, currency holders rely on bitcoin exchanges to convert bitcoins into other currencies; those entities must register with the U.S. Treasury Department as money service businesses, and could become a focus point for banking regulators going forward.
For money launders of the cyber generation there is no fear that the shadow virtual money banking systems will disappear. There are many other virtual currencies available: MoneyMail, LiqPay, UkrMoney, moneta.ru, Z-Payment, NN-Money, AlertPay, DeltaKey, AlterGold, Pecunix, V-Money, Webcreds, W1 RUR, Edram, E-Gold, C-Gold, iMoney, E-bullion, InoCard, Chebo Money, ECUmoney, Express Gold, ICQMoney, IntellectMoney, VRS, Wirex, Dengi 2.0, Younicrata. You can transfer virtual currencies to any Exchanger having a business relation with the issuer of the virtual currency. Some of the Exchangers can pay out in cash or make transactions into a correspondence bank or through Western Union without limits.

They play a key role in maintaining the secrecy of thousands of beneficial owners and hundreds of thousands of business transactions. They do this by selling their names for use on official documents of the company, using addresses in obscure parts of the world, providing the anonymity for corrupt officials, tax evaders and organized criminals.

Opaque legal structures are one of the key ways to hide the real ownership of entities that can sometimes facilitate tax evasion, corruption and organized crimes. Using nominees is a key way of hiding the real owners. One of the problems is that legal authorities in the United States, United Kingdom and many other countries don’t hold nominee directors responsible for the conduct of the companies they front.

In addition, documents setting up offshore companies often include clauses that shield nominees from financial liability if the companies get sued. It is perfectly legal in many countries to avoid having your name appear as the director or owner of a company by employing the services of a nominee, whose name appears instead. Nominees are, in essence, renting out their name, and in doing so, providing the anonymity that corrupt officials, tax evaders and organized criminals require to move dirty money around the world. Gorin and Vanagels are far from lone players in this regulatory wilderness. They just became legendary.

The ICIJ, working with The Guardian newspaper in England and the BBC’s Panorama program, identified a group of 28 other nominee directors who have represented more than 21,000 companies between them, with individual nominees representing as many as 4,000 companies. The data went public with the offshore leak scandal of 2013.

For example, Jesse Grant Hester — a young nominee director based on the English Channel island of Sark— was the director for an Irish entity Candonly Limited, which an official inquiry later found was used by the regime of Iraqi dictator Saddam Hussein to cheat the United Nations’ Oil for Food Program. Until the practice was stamped out in the late 1990s, it was common for Sark residents like Hester to lend their names as directors to businesses around the world wanting anonymity. At the height of what became known as the “Sark Lark”, the 600 inhabitants of the island held 15,000 directorships between them, some of which later led to controversy.

After a crackdown by the British government, many nominee directors from Sark relocated to other jurisdictions like Cyprus, the United Arab Emirates, Mauritius, Ireland and Switzerland and, as a simple search in the company records shows, they simply resumed operations. For example, Jesse Grant Hester, born in 1976, has been listed as a director for at least 1,500 companies in the British Virgin Islands, Britain, Ireland, Mauritius, New Zealand, London, Lugano and Geneva. Listed below you can identify the new guard of the most important nominee directors among the 28 recognized in the offshore leek scandal:

Jesse Grant Hester (UK, DOB 1976),

Brenda Patricia Cocksedge (UK, DOB 1949),

Christina Cornelia Van Den Berg (South Africa, DOB 1964),

Marea Jean O’toole (Ireland, DOB 1972),

Stephen John Kelly (UK, DOB 1964)

They play a key role in maintaining the secrecy of thousands of beneficial owners and hundreds of thousands of business transactions. They do this by selling their names for use on official documents of the company, using addresses in obscure parts of the world. Some of the companies they represent are so evidently related to organized crime activities that even a child could find out: for example there is a company in Lugano held by Jesse Grant Hester together with the controversial trustee Rudy Chereghetti in Lugano, arrested and convicted for associations with mafia operations and fraud in Italy. Few simply queries in google will show this to you.

The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files. The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific. The first seismic wave of offshore leaks was registered end of 2011 with he revelation of the Vanagels Connection. This is just the second wave and it is only about a small portion of the reality of the off-shore industry. For more information see “Launderers Anonymous: How easy is to set up untraceable companies?”

Millions of internal records have leaked from Britain’s offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.

The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.

In France, Jean-Jacques Augier, President François Hollande’s campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.

In Mongolia, the country’s former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.

But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners’ identities normally remain secret.

The naming project may be extremely damaging for confidence among the world’s wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.

BVI’s clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.

Young’s lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.

Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.

As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.

The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.

• Mongolia’s former finance minister. Bayartsogt Sangajav set up “Legend Plus Capital Ltd” with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was “a mistake” not to declare it, and says “I probably should consider resigning from my position”.

• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev’s two daughters.

• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.

It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.

Even the island’s official financial regulators normally have no idea who is behind them.

The British Foreign Office depends on the BVI’s company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.

They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI’s capital Tortola, told the Guardian it was very inaccurate to claim the island “harbours the ethically challenged”.

He said: “Our legislation provides a more hostile environment for illegality than most jurisdictions”.

Smith added that in “rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively”.

The Guardian and ICIJ’s Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.

Such so-called “nominees”, Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.

The International Consortium of Investigative Journalists (ICIJ) today launches the next part of a multi-year project aimed at stripping away the biggest mystery associated with tax havens: the owners of anonymous companies. Drawing from a trove of 2.5 million secret files, ICIJ led what may be the largest cross border journalism collaboration in history. ICIJ’s investigation opens the secrets of more than 120,000 offshore companies and trusts and nearly 130,000 individuals and agents, exposing hidden dealings of politicians, con artists, and the mega-rich in more than 170 countries.

A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.

The records detail the offshore holdings of people and companies in more than 170 countries and territories.

The hoard of documents represents the biggest stockpile of inside information about the offshore system ever obtained by a media organization. The total size of the files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

To analyze the documents, ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

Eighty-six journalists from 46 countries used high-tech data crunching and shoe-leather reporting to sift through emails, account ledgers and other files covering nearly 30 years.

“I’ve never seen anything like this. This secret world has finally been revealed,” said Arthur Cockfield, a law professor and tax expert at Queen’s University in Canada, who reviewed some of the documents during an interview with the CBC. He said the documents remind him of the scene in the movie classic The Wizard of Oz in which “they pull back the curtain and you see the wizard operating this secret machine.”

Dozens of journalists sifted through millions of leaked records and thousands of names to produce ICIJ’s investigation into offshore secrecy ­

A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.

The records detail the offshore holdings of people and companies in more than 170 countries and territories.

The hoard of documents represents the biggest stockpile of inside information about the offshore system ever obtained by a media organization. The total size of the files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

To analyze the documents, ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

Eighty-six journalists from 46 countries used high-tech data crunching and shoe-leather reporting to sift through emails, account ledgers and other files covering nearly 30 years.

“I’ve never seen anything like this. This secret world has finally been revealed,” said Arthur Cockfield, a law professor and tax expert at Queen’s University in Canada, who reviewed some of the documents during an interview with the CBC. He said the documents remind him of the scene in the movie classic The Wizard of Oz in which “they pull back the curtain and you see the wizard operating this secret machine.”

Mobsters and Oligarchs

The vast flow of offshore money — legal and illegal, personal and corporate — can roil economies and pit nations against each other. Europe’s continuing financial crisis has been fueled by a Greek fiscal disaster exacerbated by offshore tax cheating and by a banking meltdown in the tiny tax haven of Cyprus, where local banks’ assets have been inflated by waves of cash from Russia.

Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. Studies have estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year.

ICIJ’s 15-month investigation found that, alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive.

Offshore patrons identified in the documents include:

Individuals and companies linked to Russia’s Magnitsky Affair, a tax fraud scandal that has strained U.S.-Russia relations and led to a ban on Americans adopting Russian orphans.

A Venezuelan deal maker accused of using offshore entities to bankroll a U.S.-based Ponzi scheme and funneling millions of dollars in bribes to a Venezuelan government official.

A corporate mogul who won billions of dollars in contracts amid Azerbaijani President Ilham Aliyev’s massive construction boom even as he served as a director of secrecy-shrouded offshore companies owned by the president’s daughters.

Indonesian billionaires with ties to the late dictator Suharto, who enriched a circle of elites during his decades in power.

The documents also provide possible new clues to crimes and money trails that have gone cold.

After learning ICIJ had identified the eldest daughter of the late dictator Ferdinand Marcos, Maria Imelda Marcos Manotoc, as a beneficiary of a British Virgin Islands (BVI) trust, Philippine officials said they were eager to find out whether any assets in the trust are part of the estimated $5 billion her father amassed through corruption.

Manotoc, a provincial governor in the Philippines, declined to answer a series of questions about the trust.

Politically connected wealth

Maria Imelda Marcos Manotoc

The files obtained by ICIJ shine a light on the day-to-day tactics that offshore services firms and their clients use to keep offshore companies, trusts and their owners under cover.

Tony Merchant, one of Canada’s top class-action lawyers, took extra steps to maintain the privacy of a Cook Islands trust that he’d stocked with more than $1 million in 1998, the documents show.

In a filing to Canadian tax authorities, Merchant checked “no” when asked if he had foreign assets of more than $100,000 in 1999, court records show.

Between 2002 and 2009, he often paid his fees to maintain the trust by sending thousands of dollars in cash and traveler’s checks stuffed into envelopes rather than using easier-to-trace bank checks or wire transfers, according to documents from the offshore services firm that oversaw the trust for him.

One file note warned the firm’s staffers that Merchant would “have a st[r]oke” if they tried to communicate with him by fax.

Tony Merchant.

It is unclear whether his wife, Pana Merchant, a Canadian senator, declared her personal interest in the trust on annual financial disclosure forms.

Under legislative rules, she had to disclose every year to the Senate’s ethics commissioner that she was a beneficiary of the trust, but the information was confidential.

The Merchants declined requests for comment.

Other high profile names identified in the offshore data include the wife of Russia’s deputy prime minister, Igor Shuvalov, and two top executives with Gazprom, the Russian government-owned corporate behemoth that is the world’s largest extractor of natural gas.

Shuvalov’s wife and the Gazprom officials had stakes in BVI companies, documents show. All three declined comment.

In a neighboring land, the deputy speaker of Mongolia’s Parliament said he was considering resigning from office after ICIJ questioned him about records showing he has an offshore company and a secret Swiss bank account.

“I shouldn’t have opened that account,” Bayartsogt Sangajav, who has also served as his country’s finance minister, said. “I probably should consider resigning from my position.”

Bayartsogt said his Swiss account at one point contained more than $1 million, but most of the money belonged to what he described as “business friends” he had joined in investing in international stocks.

He acknowledged that he hasn’t officially declared his BVI company or the Swiss account in Mongolia, but he said he didn’t avoid taxes because the investments didn’t produce income.

“I should have included the company in my declarations,” he said.

Wealthy Clients

The documents also show how the mega-rich use complex offshore structures to own mansions, art and other assets, gaining tax advantages and anonymity not available to average people.

Baroness Carmen Thyssen-Bornemisza.

Spanish names include a baroness and famed art patron, Carmen Thyssen-Bornemisza, who is identified in the documents using a company in the Cook Islands to buy artwork through auction houses such as Sotheby’s and Christie’s, including Van Gogh’s Water Mill at Gennep.

Her attorney acknowledged that she gains tax benefits by holding ownership of her art offshore, but stressed that she uses tax havens primarily because they give her “maximum flexibility” when she moves art from country to country.

Among nearly 4,000 American names is Denise Rich, a Grammy-nominated songwriter whose ex-husband was at the center of an American pardon scandal that erupted as President Bill Clinton left office.

A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, played a key role in the campaign that persuaded Clinton to pardon her ex-spouse, Marc Rich, an oil trader who had been wanted in the U.S. on tax evasion and racketeering charges.

Denise Rich.

Records obtained by ICIJ show she had $144 million in April 2006 in a trust in the Cook Islands, a chain of coral atolls and volcanic outcroppings nearly 7,000 miles from her home at the time in Manhattan.

The trust’s holdings included a yacht called the Lady Joy, where Rich often entertained celebrities and raised money for charity.

Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust.

Another prominent American in the files who gave up his citizenship is a member of the Mellon dynasty, which started landmark companies such as Gulf Oil and Mellon Bank. James R. Mellon – an author of books about Abraham Lincoln and his family’s founding patriarch, Thomas Mellon – used four companies in the BVI and Lichtenstein to trade securities and transfer tens of millions of dollars among offshore bank accounts he controlled.

Like many offshore players, Mellon appears to have taken steps to distance himself from his offshore interests, the documents show. He often used third parties’ names as directors and shareholders of his companies rather than his own, a legal tool that owners of offshore entities often use to preserve anonymity.

James R. Mellon.

Reached in Italy where lives part of the year, Mellon told ICIJ that, in fact, he used to own “a whole bunch” of offshore companies but has disposed of all of them. He said he set up the firms for “tax advantage” and liability reasons, as advised by his lawyer. “But I have never broken the tax law.”

Of the use of nominees, Mellon said that “that’s the way these firms are set up,” and added that it’s useful for people like him who travel a lot to have somebody else in charge of his businesses. “I just heard of a presidential candidate who had a lot of money in the Cayman Islands,” Mellon, now a British national, said, alluding to former U.S. presidential candidate Mitt Romney.

“Not everyone who owns offshores is a crook.”

Offshore growth

The anonymity of the offshore world makes it difficult to track the flow of money. A study by James S. Henry, former chief economist at McKinsey & Company, estimates that wealthy individuals have $21 trillion to $32 trillion in private financial wealth tucked away in offshore havens — roughly equivalent to the size of the U.S. and Japanese economies combined.

Even as the world economy has stumbled, the offshore world has continued to grow, said Henry, who is a board member of the Tax Justice Network, an international research and advocacy group that is critical of offshore havens. His research shows, for example, that assets managed by the world’s 50 largest “private banks” — which often use offshore havens to serve their “high net worth” customers — grew from $5.4 trillion in 2005 to more than $12 trillion in 2010.

Henry and other critics argue that offshore secrecy has a corrosive effect on governments and legal systems, allowing crooked officials to loot national treasuries and providing cover to human smugglers, mobsters, animal poachers and other exploiters.

Offshore’s defenders counter that most offshore patrons are engaged in legitimate transactions. Offshore centers, they say, allow companies and individuals to diversify their investments, forge commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and red tape of the onshore world.

“Everything is much more geared toward business,” David Marchant, publisher of OffshoreAlert, an online news journal, said. “If you’re dishonest you can take advantage of that in a bad way. But if you’re honest you can take advantage of that in a good way.”

Much of ICIJ’s reporting focused on the work of two offshore firms, Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited (CTL), which have helped tens of thousands of people set up offshore companies and trusts and hard-to-trace bank accounts.

Regulators in the BVI found that CTL repeatedly violated the islands’ anti-money-laundering laws between 2003 and 2008 by failing to verify and record its clients’ identities and backgrounds. “This particular firm had systemic money laundering issues within their organization,” an official with the BVI’s Financial Services Commission said last year.

The documents show, for example, that CTL set up 31 companies in 2006 and 2007 for an individual later identified in U.K. court claims as a front man for Mukhtar Ablyazov, a Kazakh banking tycoon who has been accused of stealing $5 billion from one of the former Russian republic’s largest banks. Ablyazov denies wrongdoing.

Thomas Ward, a Canadian who co-founded CTL in 1994 and continues to work as a consultant to the firm, said CTL’s client-vetting procedures have been consistent with industry standards in the BVI, but that no amount of screening can ensure that firms such as CTL won’t be “duped by dishonest clients” or sign on “someone who appears, to all historical examination, to be honest” but “later turns to something dishonest.”

“It is wrong, though perhaps convenient, to demonize CTL as by far the major problem area,” Ward said in a written response to questions. “Rather I believe that CTL’s problems were, by and large, directly proportional to its market share.”

ICIJ’s review of TrustNet documents identified 30 American clients accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct. They include ex-Wall Street titans Paul Bilzerian, a corporate raider who was convicted of tax fraud and securities violations in 1989, and Raj Rajaratnam, a billionaire hedge fund manager who was sent to prison in 2011 in one of the biggest insider trading scandals in U.S. history.

TrustNet declined to answer a series of questions for this article.

Blacklisted

The records obtained by ICIJ expose how offshore operatives help their customers weave elaborate financial structures that span countries, continents and hemispheres.

A Thai government official with links to an infamous African dictator used Singapore-based TrustNet to set up a secret company for herself in the BVI, the records show.

Nalinee Taveesin.The Thai official, Nalinee “Joy” Taveesin, is currently Thailand’s international trade representative. She served as a cabinet minister for Prime Minister Yingluck Shinawatra before stepping down last year.

Taveesin acquired her BVI company in August 2008. That was seven months after she’d been appointed an advisor to Thailand’s commerce minister — and three months before the U.S. Department of Treasury blacklisted her as a “crony” of Zimbabwean dictator Robert Mugabe.

The Treasury Department froze her U.S. assets, accusing her of “secretly supporting the kleptocratic practices of one of Africa’s most corrupt regimes” through gem trafficking and other deals made on behalf of Mugabe’s wife, Grace, and other powerful Zimbabweans.

Taveesin has said her relationship with the Mugabes is “strictly social” and that the U.S. blacklisting is a case of guilt by association. Through her secretary, Taveesin flatly denied that she owns the BVI company. ICIJ verified her ownership using TrustNet records that listed her and her brother as shareholders of the company and included the main address in Bangkok for her onshore business ventures.

Records obtained by ICIJ also reveal a secret company belonging to Muller Conrad “Billy” Rautenbach, a Zimbabwean businessman who was blacklisted by the U.S. for his ties to the Mugabe regime at the same time as Taveesin. The Treasury Department said Rautenbach has helped organize huge mining projects in Zimbabwe that “benefit a small number of corrupt senior officials.”

When CTL set Rautenbach up with a BVI company in 2006 he was a fugitive, fleeing fraud allegations in South Africa. The charges lodged personally against him were dismissed, but a South African company he controlled pleaded guilty to criminal charges and paid a fine of roughly $4 million.

Rautenbach denies U.S. authorities’ allegations, contending that they made “significant factual and legal errors” in their blacklisting decision, his attorney, Ian Small Smith, said. Smith said Rautenbach’s BVI company was set up as “special purpose vehicle for investment in Moscow” and that it complied with all disclosure regulations. The company is no longer active.

‘One Stop Shop’

Offshore’s customers are served by a well-paid industry of middlemen, accountants, lawyers and banks that provide cover, set up financial structures and shuffle assets on their clients’ behalf.

Documents obtained by ICIJ show how two top Swiss banks, UBS and Clariden, worked with TrustNet to provide their customers with secrecy-shielded companies in the BVI and other offshore centers.

Clariden, owned by Credit Suisse, sought such high levels of confidentiality for some clients, the records show, that a TrustNet official described the bank’s request as “the Holy Grail” of offshore entities — a company so anonymous that police and regulators would be “met with a blank wall” if they tried to discover the owners’ identities.

Clariden declined to answer questions about its relationship with TrustNet.

“Because of Swiss banking secrecy laws, we are not allowed to provide any information about existing or supposed accountholders,” the bank said. “As a general rule, Credit Suisse and its related companies respect all the laws and regulations in the countries in which they are involved.”

A spokesperson for UBS said the bank applies “the highest international standards” to fight money laundering, and that TrustNet “is one of over 800 service providers globally which UBS clients choose to work with to provide for their wealth and succession planning needs. These service providers are also used by clients of other banks.”

TrustNet describes itself as a “one-stop shop” — its staff includes lawyers, accountants and other experts who can shape secrecy packages to fit the needs and net worths of its clients. These packages can be simple and cheap, such as a company chartered in the BVI. Or they can be sophisticated structures that weave together multiple layers of trusts, companies, foundations, insurance products and so-called “nominee” directors and shareholders.

When they create companies for their clients, offshore services firms often appoint faux directors and shareholders — proxies who serve as stand-ins when the real owners of companies don’t want their identities known. Thanks to the proliferation of proxy directors and shareholders, investigators tracking money laundering and other crimes often hit dead ends when they try to uncover who is really behind offshore companies.

An analysis by ICIJ, the BBC and The Guardian identified a cluster of 28 “sham directors” who served as the on-paper representatives of more than 21,000 companies between them, with individual directors representing as many 4,000 companies each.

Thousands of offshore entities are headquartered on this building’s third floor, which houses TrustNet’s Cook Islands office. Photo: Alex Shprintsen

‘Zone of Impunity’

International groups have been working for decades to limit tax cheating and corruption in the offshore world.

In the 1990s, the Organization for Economic Cooperation and Development began pushing offshore centers to reduce secrecy and get tougher on money laundering, but the effort ebbed in the 2000s. Another push against tax havens began when U.S. authorities took on UBS, forcing the Swiss bank to pay $780 million in 2009 to settle allegations that it had helped Americans dodge taxes. U.S. and German authorities have pressured banks and governments to share information about offshore clients and accounts and UK Prime Minister David Cameron has vowed to use his leadership of the G8, a forum of the world’s richest nations, to help crack down on tax evasion and money laundering.

Promises like those have been met with skepticism, given the role played by key G8 members — the U.S., the U.K. and Russia — as sources and destinations of dirty money. Despite the new efforts, offshore remains a “zone of impunity” for anyone determined to commit financial crimes, said Jack Blum, a former U.S. Senate investigator who is now a lawyer specializing in money laundering and tax fraud cases.

“Periodically, the stench gets so bad somebody has to get out there and clap the lid on the garbage can and sit on it for a while,” Blum said. “There’s been some progress, but there’s a bloody long way to go.”

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Economic Crime Intelligence (ECI) is the targeted provision of qualified information to build a line of defense against economic crime.
Latest intelligence expertise enables our task force to uncover potential risks of any kind – from emerging changes in the strategic environment all the way up to criminal intentions of individual persons.
We have access to the world’s best information collections, a high-grade network of regional investigators and experienced analysts delivering qualified facts that enable you to identify potential threats and make well-grounded decisions.

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